Have you seen the recent Home Hardware ads, where an adorable young couple tackles a complete home renovation on their own? It’s hard not to root for them. But while the do-it-yourself attitude is admirable, there are some things in life where professional help is needed, and estate planning is one of them. Estate planning mistakes aren’t easily fixed, especially since they might not be discovered until you’re gone. Here are a few reasons why professional help is important.
An objective voice on family dynamics
The influence of family relationships on your plan is greater than any other factor. Who gets along with whom? Who has special needs? Should estate assets be owned jointly by all beneficiaries, or sold? Who do you trust to manage your estate?
That’s where a professional can help. You’re caught up in family dynamics, whether you like it or not. And an objective voice can do wonders for quieting the family voices you hear and providing some clear advice to help you arrange your estate in a manner that reflects the unique dynamics of your situation.
They can also help you communicate your plan to your family during your lifetime, to minimize estate conflicts later. Trust me, we’ve seen it all. If there are issues within your family now, you can be certain they won’t be any better once you’re gone. The more you can do to communicate your estate plan and listen to family members and address concerns during your lifetime, the smoother the estate settlement process will be.
They see things you haven’t thought of
An estate plan doesn’t have to be complicated, but all good plans have one thing in common – they cover all the angles. The mistakes in estate planning often relate to what isn’t in the plan rather than what is.
One of the key benefits of planning with a professional is the use of a methodical approach to cover off the key elements that pertain to your estate, whether related to business, your children from a previous marriage, beneficiaries, or assets in other jurisdictions.
The coordination of beneficiary designations for insurance policies and registered plans is a great example, because it’s a commonly missed item. These policies and plans may have been put in place over many years, with designations that no longer reflect your desired division of assets.
You have a role too
While professional advice is an essential element of a solid estate plan, your input is obviously an important part of it. And the more you know about the estate planning process, the more value you bring to the table. This recent Globe and Mail article highlights three estate planning books you might want to read to learn more about the process and the elements of your estate plan that you may not have considered:https://www.theglobeandmail.com/globe-investor/globe-advisor/beyond-the-beach-read-estate-planning-books-for-canadians/article35981401/.
Thank you for reading,
The recent Court of Appeal of Alberta decision in Goold Estate v. Ashton, 2017 ABCA 295 (CanLII) addresses the issues of presumptions and the burden of proof surrounding lost wills and the presumption of revocation.
There, the deceased died leaving a holograph will. The holograph will revoked a prior formal will. However, the holograph will could not be found following the deceased’s death.
The court referred to the presumption of revocation: a will will be presumed to be revoked by destruction where the original cannot be located after the death of the deceased. The party relying on the presumption of revocation has the burden of proving (a) possession and control of the will by the testator; (b) continuing capacity to revoke the will; and (c) the absence of the will after death.
As to the second point, in order to rely on the presumption of revocation, the party relying on it must show that the testator had capacity to make or revoke a will. On the evidence, it was not clear as to when the will was revoked and when the testator lost capacity. There was evidence that the testator did not have capacity for a significant portion of the time during which the holograph will was under the testator’s control. The party relying on the presumption was therefore not able to discharge the burden on her to establish that the testator had capacity at the time of the revocation of the will. The Court of Appeal upheld this analysis.
Once the presumption is found to apply, the presumption can be rebutted by showing, on a balance of probabilities, that the testator did not destroy the will or intend to revoke it. The judge below found that, even if the presumption did apply, the presumption had been rebutted. The court considered:
- whether the terms of the will were reasonable;
- whether the testator continued to have a good relationship with the beneficiaries of the lost will;
- whether personal effects of the deceased were destroyed prior to the search for the lost will being carried out;
- the nature and character of the deceased in taking care of personal effects;
- whether there were any dispositions of property that support or contradict the terms of the lost will;
- statements made by the testator which confirm or contradict the terms of the lost will;
- whether the testator was of the character to store valuable papers, and whether the testator had a safe place to store them;
- whether the testator understood the consequence of not having a will; and
- whether the testator made statements to the effect that she had a will.
The judge below found that there was sufficient evidence to establish, on a balance of probabilities, the absence of an intention to revoke the holograph will. The Court of Appeal would not interfere with these findings of fact.
For other discussions of lost wills, see What Does One Do When There’s a Lost or Defective Will? and Saving Lost Wills?
Thank you for reading. I presume that you will have a great weekend. Don’t rebut my presumption.
There are a few holdovers from the Mad Men era of 50 or 60 years ago, when men were the primary breadwinners and wealth managers – and women looked after the home and family.
On the home front, even though almost four out of five women work outside the home, they still do more housework than men. Yes, men are getting better, but as Maclean’s magazine puts it, this evolution is happening “at a glacial pace”:
Perhaps more importantly, the money management part of the 1950s has also been slow to change – with some significant differences in financial literacy and financial confidence between men and women. According to research from Sun Life Financial: https://www.sunlife.ca/static/canada/GRS%20matters/GRS%20matters%20articles/2015/Bright%20Papers/Mind%20the%20retirement%20Gap_Unretirement%20Paper_E%2006-15_June%2011.pdf:
- 46% of women say they lack sufficient knowledge about how much retirement income they would need, versus 37% for men
- 35% of women say they lack sufficient knowledge about how to select investments, versus 26% for men; and
- 32% of women say they lack sufficient knowledge about government programs (such as CPP/QPP, Old Age Security), versus 24% for men.
RBC has also studied the issue and reached a similar conclusion, with only 48% of women feeling confident in their knowledge of wealth and money topics, versus 65% of men: https://www.rbcwealthmanagement.com/ca/en/research-insights/gaining-perspective-on-women-in-wealth-transfer-and-overall-wealth-planning/detail/.
Too often, this lack of knowledge and confidence means that in a male/female relationship, investment, wealth and estate planning falls to the male, with the female less involved. And that’s problematic. With high marital breakdown rates and a longer female lifespan, 90% of women will be solely responsible for their finances at some point in their life. And many women will inherit money twice – once from their parents and once from their spouse. Inheritances are major financial events that can involve a number of decisions and planning changes – and knowledge and good advice is critical.
A couple of changes are needed:
- Get involved – sooner not later. Women not currently active in long-term wealth planning for themselves and their families need to get involved. It’s their future, and, at some point, it’s likely to be a future on their own. Now is the time to get involved to ensure it’s a secure one.
- Get a financial advisor who truly meets your needs. Wealth advisors historically have not been good at catering to the advice and planning needs of women. Studies have shown that in the U.S., 70% of women change financial advisors after their spouse has died. In Canada, the number is 80%. Clearly, many women are not happy with the advice they’re getting. If you’re involved with your finances, and your current advisor is catering to your male partner and not to your concerns, don’t wait until there’s a death in the family to take action.
This article in the Globe and Mail spells out the issues well. It’s worth a read: https://www.theglobeandmail.com/globe-investor/investment-ideas/financial-advisers-have-trouble-talking-to-women/article22726458/.
Thank you for reading!
While we don’t wish ill of anyone, one little dream that many people share is the long lost inheritance.
You have a distant aunt who lived happily in Europe until her death five years ago at age 100. You didn’t know you had a distant aunt until you travelled to Europe and visited the village that you knew your family was from. People in the village started talking: “maybe this is Giovanni” and the next thing you know, you’re being whisked to the village lawyer and told that you had a distant aunt who died five years ago and left you 100,000 euros. And the money’s been waiting for you all this time!
Such a win-win scenario – an aunt with a happy life, a potful of money to take home, and an introduction to relatives you barely knew you had. Could it happen to you?
Not likely, especially in today’s digital age. While any one of us could get an inheritance from someone who secretly names us in their will – a scenario that happens more frequently than you might think – if you are named in a will, it’s likely that you’ll find out soon after the person dies.
The reason is twofold: first, estate trustees (executors) have a duty to contact all beneficiaries, and they must make reasonable efforts to find unknown or missing heirs. So, the search is on quickly to find you if you are a beneficiary. You can read more about the duty of estate trustees to track beneficiaries here.
Second, in this digital age, it’s becoming less and less likely that you cannot be found, with search engines, social media and family history all available at the touch of a button. The internet has made those “so you’re Giovanni” moments few and far between.
That said, there may be situations where a somewhat distant family member has died and you think you might be a beneficiary. You wait for a month or two, but hear nothing. In addition, there have been more than a few family disagreements over the years, so you’re worried about your rights as a potential beneficiary and want to get information about the will.
In Ontario, this provincial government site provides a good overview of the estate settlement process, and where you can get information about a will. And this article by Newfoundland lawyer Lynne Butler provides some very practical steps that you can take to gain access to a will if it has not yet been made public.
Thank you for reading!
We know there are many estate planning situations that are enormously complex. Corporate ownership, assets in multiple jurisdictions, multiple family beneficiaries, family dysfunction issues – all of these can complicate an estate plan significantly.
But there are few estate planning issues as urgent as planning for the future care of someone with a physical, mental or emotional disability, especially when it’s a child with a long life ahead but who lacks the capacity to look after their own needs.
I use the word “urgent” because the great fear of loving parents planning ahead for the care of their special needs child is “getting it wrong” and leaving an estate that doesn’t adequately address their child’s needs. The good news is that a combination of good advice and careful planning will go a long way to ensuring you “get it right.” Here are a few high-level suggestions that can help you get there:
- Start as early as possible: When you have a young child with a significant disability, time, energy and the ability to think beyond the needs of the day are often limited. So it’s tough to think about the future – especially when it concerns death. But it’s worth your thinking time. While the risk of you and a spouse passing away at an early age is low, the risk isn’t zero. All new parents should be addressing issues such as life insurance and their will when they have a child. But it’s even more critical if your child is unlikely to be able to care for themselves as an adult. And by starting your planning at an early stage, you may be able to maximize the benefits of certain planning tools, like the Registered Disability Savings Plan (RDSP).
- Get advice – and understand the tools available to you: There is no “one size fits all” when it comes to estate planning for someone with special needs. There are government benefits that an individual may be eligible for, like the Ontario Disability Support Program, savings arrangements available, like the RDSP, and trust arrangements to consider, like a “Henson Trust” https://hullandhull.com/2015/12/henson-trust-advantages-and-disadvantages/ that can provide ongoing income to a beneficiary without jeopardizing eligibility for government benefits. A lawyer or financial professional with expertise in this area can be an invaluable resource.
- Put a plan in place: Act on the good advice you get and put your plan in place. That means moving the drafting and execution of your will up your priority list, because it’s a process that few enjoy and often falls into the “I’ll get to it eventually” category. There’s a lot at stake, so do it sooner rather than later.
- Revisit your plan regularly: Your situation may change, your child’s needs may change, and laws may change. Sit down with a professional every few years to review your plan and determine if a change could be beneficial.
This advisory has a good overview of the main planning tools that may be available to you:
Thank you for reading … Have a wonderful day!
Trusts have been around for hundreds of years, so a type that’s only been around for 17 years is still considered “new” in the trust world. Two types of living trusts (those that you establish during your lifetime) – the alter-ego trust and joint spousal trust – have been available to Canadians only since 2000. These “newer” trusts are worth a quick review, because they can be beneficial in many estate situations.
Trusts with a twist
Like other types of living trust, you create an alter-ego or joint spousal trust by transferring ownership of assets to a trustee (either an individual or a trust company), which then manages and administers those assets for the trust’s beneficiary. But that’s where the similarities end. There are three key differences with an alter-ego trust:
- Unlike other living trusts, there is no deemed sale of your assets at the time of transfer. So, you can roll over assets into the trust without triggering any immediate capital gains tax liability;
- You must be at least 65 years old to settle an alter-ego or joint spousal trust; and
- You must be the sole beneficiary (or you and your spouse in the case of a joint spousal trust), with an entitlement to income and capital during your lifetime. As with any living trust, income retained in the trust is taxed in the trust’s hands at the highest marginal tax rate.
Why consider an alter ego or joint spousal trust? There are a few reasons:
- Bye-bye probate fees: The trust assets do not form part of your estate and are not subject to any probate fees or taxes which may apply. For example, in Ontario – which has the country’s highest estate administration tax – a $1.5 million estate would be liable for $22,000 in taxes. By placing some or all of the estate assets in an alter-ego or joint spousal trust, the estate would benefit from significant tax savings. And if you transfer your principal residence into the trust, the trust maintains the benefit of the principal residence exemption.
- Privacy and protection: Both forms of trust avoid the public disclosure of your named beneficiary and of the assets in the trust, both of which are part of the probate process. They can also offer creditor protection, because ownership of the asset is transferred to the trustee. However, if the purpose of the trust is found to have been set up to avoid or defeat creditors, then those assets can be clawed back and you won’t be able to protect them against creditors.
- Convenience: The trusts also offer protection in the event of incapacity. If you – or both you and your spouse – become incapacitated, the protection of the trust is already in place and the assets continue to be administered by the trustee for your continuing benefit. These trusts can also prevent litigation because it can more difficult to challenge the validity of a living trust than a will.
Of course, you need to balance these benefits with some of the disadvantages. You no longer have access to the capital in the trust, you’re not able to write off any capital losses against capital gains upon death, and there are legal and other costs to setting up the trust, along with ongoing administration expenses, such as trustee fees and the cost of annual tax returns.
For a more detailed analysis of the pros and cons, RBC offers an excellent overview: http://ca.rbcwealthmanagement.com/documents/682561/682577/Alter+Ego+%26+Joint+Partner+Trusts.pdf/3957f00a-c0ea-4917-b02c-f1bc74f44660
Thank you for reading!
They love football, we love hockey. Their zee is our zed – and their Trump is our Trudeau. While we share a common border with the U.S., there are many differences between our two nations – and the reasons for setting up a trust can differ significantly by country as well.
The U.S. has a high estate tax for wealthy individuals – up to 40% on assets, with the first $5.5 million or so exempt. Not surprisingly, trusts are used aggressively in many situations to reduce estate values and minimize this estate tax as much as possible.
In Canada, there is no estate tax per se – although there is an estate administration tax (probate fee) in some provinces and there are often taxes payable on capital gains. But with no capital gains taxes on principal residences, the need for trusts as part of U.S.-style estate planning simply isn’t there.
This doesn’t mean that trusts aren’t a valuable planning tool in Canada. They can still be used to shift income from higher-taxed family members to those in lower tax brackets, or to provide dedicated funding for dependants, such as a disabled spouse or child, or as means of creditor protection amongst many other reasons. But there’s a kinder, gentler push behind trust planning in Canada, owing to the less punitive (in most cases) taxation of estates here.
This Globe and Mail article provides a good overview of the many potential uses of trusts in Canada today, and why a more aggressive approach isn’t needed here: https://www.theglobeandmail.com/globe-investor/personal-finance/a-tax-tool-thats-not-just-for-trust-fund-babies/article22996097/
The complexities of cross-border beneficiaries
Trust issues can be clean and tidy in Canada and the U.S. when everything about a trust stays fully north or south of the border. But what happens when trust worlds collide?
In short, it can get complicated, and specialized planning is often needed to avoid additional taxation. While avoiding a cross-border trust arrangement is one way around these issues, avoidance isn’t always possible, such as when a Canadian trust is settled with a Canadian beneficiary, but that individual moves permanently to the U.S. and becomes subject to U.S. tax laws.
This Collins Barrow advisory offers a more detailed discussion of some of the cross-border issues relating to Canadian/U.S. trusts: http://www.collinsbarrow.com/en/cbn/publications/u.s.-citizens-and-canadian-trusts.
Thank you for reading … Have a great day!
Estate planning can be tricky enough without some of the other issues often associated with aging – the need for care, moving homes, declining mental capacity, or the death of a spouse. Elder mediation – a specialized form of mediation that goes beyond mediation training and experience to include issues specifically related to the elderly – now has a presence in Canada after gaining a strong foothold in the United States.
The elder mediation specialty recognizes that conflicts often come to the surface as parents age and key decisions – such as those relating to ongoing health care, estate planning, and the upkeep and use of assets like cottages and vacation homes – need to be made.
How would you and your family cope when an elder member of your family enters a transition stage? Two U.S. elder mediators have identified four categories of families in how they handle a major elder transition:
- Graceful transitions – the family successfully manages old age and its transitions through targeted planning and effective communication, along with good legal and financial advice. Even as elders experience their inevitable physical decline, family members manage this process with dignity and respect.
- Successful struggles – the family has one or two major issues to work through but manages to come to a positive outcome with the support of friends, family and advisors.
- Quietly bruised – the family may be unable to move forward with important decisions and are living with situations that leave an aging parent in peril and increase emotional, financial and safety risks. There is often a sense of discomfort with choices made, and there may be disagreements festering under the surface about care giving, housing or inheritance decisions.
- Litigious – things have gone from bad to worse, and there is either the threat of litigation or actual litigation required to get decisions made. Wounds abound, and relationships are often destroyed forever between some family members.
You can find the full article here: http://www.mediationinstitute.net/training/wp-content/uploads/2011/12/MediationinEstatePlanningandElderCare.pdf
Elder mediation isn’t required in most family situations, but if either of the last two categories of family seem familiar, it’s a process well worth considering. Family Mediation Canada has more information on elder mediation in this country: http://www.fmc.ca/elder-mediation
Thank you for reading!
The disposition at death of many personal assets – a home, stocks, bank deposits – is typically straightforward in terms of how they are treated under the terms of a will and their valuation.
But other special or unique assets, such as foreign real property, art and collectibles, can require special attention from an estate planning perspective to ensure the assets and the overall estate are distributed tax-efficiently and fairly based on the testator’s wishes.
Foreign real property
It’s become increasingly common for Canadian estates to include foreign-based property upon death. This is due to a number of factors, from people working or marrying abroad, to the inheritance of property located in their country of birth, to the desire for recreational property in a warmer climate.
From an estate law perspective, foreign-based assets can give rise to estate administration issues that are best addressed as part of an estate plan created in consultation with professional advisors. For U.S. property in particular, the ownership structure remains one of the most important planning points to consider because of the tax implications to which various arrangements can give rise.
Some of the most common options include ownership through a Canadian trust, corporation, partnership, or joint ownership. Each of these options has various advantages and disadvantages, which will vary depending on each specific situation. BDO provides a good overview of U.S. estate tax for Canadians.
For all international property, it’s important to remember that it may not be subject to a Canadian will, as real property is generally governed by the laws of the jurisdiction in which the property is situated. For this reason, consider the use of a foreign “situs” will that meets the requirements of the applicable jurisdiction. While there are potential consequences to using a “situs” will, such as the inadvertent revocation of other wills, careful planning and drafting of such a will can ensure that the asset is properly handled as part of your estate.
It’s also important to remember that both foreign and domestic laws – especially tax laws – change frequently over time. Consulting a professional advisor and revisiting your estate plan on a regular basis can ensure your estate plan remains sound.
Art and collectibles
Assets such as fine paintings, classic cars, and tapestries should also be given special treatment from an estate planning perspective. Since such collections usually grow over many years, their values can change dramatically over time as well. For collections with a high probable value, it’s wise to have them professionally appraised and inventoried. This should include a photo, description and appraised value of each piece.
With a proper valuation, you’ll be able to plan for accurate gift, estate and income tax planning. For example, if you have an adult child who treasures a particular art piece, but you want to ensure your estate is divided equally amongst all your children, you can leave the artwork to the child knowing its appraised value, and use other assets to provide an equal share to your other children.
Knowing the true value of your collection can also be important from a charitable giving perspective. Many collectors hope to donate these assets to galleries or museums. This recent Globe and Mail article discusses some of the key issues that collectors should consider when making their estate plan.
Thanks for reading.
With the Stanley Cup Finals in full swing, I thought it would be interesting to re-visit the history surrounding the trust that holds the Stanley Cup.
According to this article, upon Lord Stanley of Preston being appointed Governor General of Canada by Queen Victoria in 1888, both him and his family became enamoured with hockey. So much so, that he created the ‘Dominion Hockey Challenge Cup’ to be held year to year by the championship hockey team in the Dominion of Canada.
To ensure the Cup remained true to Lord Stanley’s intention, he settled a charitable trust, with the Cup being the trust property. He appointed two trustees to administer the trust, and set out these initial trust terms:
- The winners shall return the Cup in good order when required by the trustees so that it may be passed to future winning teams;
- Each winning team, at its own expense, may have the club’s name and year engraved on a silver ring fitted on the Cup;
- The Cup shall remain a challenge cup, and should not become the property of one team, even if won more than once;
- The trustees shall maintain absolute authority in all situations or disputes over the winner of the Cup; and,
- If one of the existing trustees resigns or drops out, the remaining trustee shall nominate a substitute.
So, to answer the question – the NHL does not own the Cup. Nevertheless, the NHL was able to reach an agreement with the trustees in 1947 where, amongst other things, it obtained exclusive rights to award the Cup.
However, as a result of legal proceedings commenced by a recreational league hockey team during the last NHL lockout, the agreement was varied to allow the trustees to award the cup to a non-NHL team should the NHL fail to organize a competition.
Other sports related blogs can be found here: